Member Sign In

You are being directed to ZacksTrade, a division of Zacks & Company and licensed broker-dealer. ZacksTrade and Zacks.com are separate but affiliated companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.

If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.

Video Game Sales Surge in September

You have chosen to follow this author. You will receive an email notification when this author publishes a new article. Click submit to continue.

You are alredy following the Author

The Author could not be added at this time, please try again later. If problem persists, please contact Zacks Customer support.

Please Login

Video game retail sales jumped significantly in September, primarily driven by higher software sales, which fully offset declining hardware sales in the month. According to market research firm NPD, sales surged 27.0% year over year to $1.08 billion. Sales were significantly up from $521.0 million reported in August and $443.0 million reported in July.

Software sales soared 52.0% year over year to $754.3 million, considerably higher than $293.4 million reported in August and $222.3 million reported in July. The strong growth was primarily driven by robust performance from Take Two Interactive’s (TTWO - Snapshot Report) Grand Theft Auto V, which became the top-selling game of the month.

Despite declining 13.0% year over year to $183.2 million, hardware sales were much higher than $90.8 million reported in August and $99.4 million in July. Sony’s (SNE - Snapshot Report) PlayStation 3 was the best console in terms of unit sales in the month, ending Microsoft’s (MSFT - Analyst Report) reign at the top for 32 consecutive months. Nintendo’s 3DS was the bestselling hardware platform in the month.

Digital Games Sales

According to market research firm Super Data, overall digital sales increased 6.0% year over year to $970.0 million in September. This was higher than $846.0 million reported in August but lower than $1.1 billion reported in Jul 2013.

Revenues from social games increased 16.0% year over year to $176.0 million, better than $166.0 million reported in August. Mobile gaming revenues surged 52.0% year over year and increased 14.0% on a month-over-month basis to $266.0 million. Monthly active users were 246 million at the end of September.

Free-to-play revenues were $249.0 million in the month, while subscriber base grew approximately 700K. Subscription based MMO revenues were $82.0 million, down from $88.0 million reported in August. However, subscriber base declined by 300K in September.

Downloadable game content sales decreased 23.0% year over year to $198.0 million in September.

Our Take

We expect video game retail sales to improve significantly over the next couple of months due to the launch of new hardware consoles from Microsoft and Sony and a host of new game releases such as Battlefield 4 and Call of Duty: Ghosts.

Moreover, higher consumer spending during the holiday season will further boost sales in the near term.

We believe that increasing revenues from mobile and downloadable contents (DLCs) will drive digital revenues going forward. Mobile has strong growth potential due to improving gaming quality, which is a major factor behind higher user spending.

Further, game developers such as EA and Activision Blizzard (ATVI - Snapshot Report) are actively using the digital distribution platform to provide additional downloadable contents for popular titles such as Battlefield and Call of Duty. This will further boost revenues from DLC going forward.

Among the traditional gaming companies, we believe that EA, Activision and Take-Two Interactive have significant growth opportunities due to their innovative product pipeline in the near term. However, market fragmentation remains a major headwind in the near term.

Just Released: 5 Stocks Set to Double

Today, you are invited to download a free Special Report from Zacks Investment Research. It reveals five moves that could gain +100% and more in the next 12 months:

One company announced a cancer breakthrough that scored a 79% increase in progression-free survival in Phase III testing. Another is set to gain steam from a $3.45 billion acquisition. Still another has room for price increases that could send margins through the roof.

Top Zacks Features

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

Zacks Research is Reported On:

At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system. Since 1986 it has nearly tripled the S&P 500 with an average gain of +26% per year. These returns cover a period from 1986-2011 and were examined and attested by Baker Tilly, an independent accounting firm.

Visit performance for information about the performance numbers displayed above.